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CA Foundation · Quantitative Aptitude · Correlation and Regression

Which of the following statements about the concurrent deviation method of finding correlation is correct?

The correct statement is that the method looks only at the direction of change, not its size, so it is a quick but approximate measure. It does not need standard deviations or actual magnitudes. With N observations it gives N − 1 pairs of deviations.

  1. AIt considers only the direction of change and not its size, so it gives a quick approximate measure of correlationCorrect
  2. BIt uses the actual magnitude of the deviations, so it is more accurate than Karl Pearson's method
  3. CIt needs the standard deviations of both series before the coefficient can be found
  4. DWith N observations the number of pairs of deviations is N, so no observation is lost

Explanation

The method only marks each change as + or − and counts the pairs with the same sign, so the size of the change is ignored. This makes it quick but only approximate. The number of pairs of deviations is N − 1, not N. No standard deviations are needed.

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